Kawasaki Heavy Industries plans (2018) to restructure rolling-stock operations amid heavy losses, exploring such options as quitting the business and teaming up with other companies. This is unusual for a major Japanese firm to pull out of an industry, a country, and the United States. Or at least I find it unusual having worked for a Japanese company as middle management. Some factors:
- Losing Money: The company has been waging fierce competition for orders with rivals that have grown in scale through consolidation.
- Domestic Production Issues: Kawasaki Heavy Industries is under pressure following the announcement of production faults in components for Japan’s shinkansen bullet trains. The Japanese company this week admitted supplying substandard undercarriages to West Japan Railway, after a cracking frame was discovered in December.
- Canceled Orders: Malaysian Prime Minister Mahathir Mohamad said in May he would call off a high-speed rail link between Kuala Lumpur and Singapore worth about 20 billion Singapore dollars ($14 billion). Companies besides Kawasaki (East Japan Railway) had also hoped for a piece before Malaysia and Singapore reached an agreement to defer the project instead.
- Labor and Communication: Difficulty of procuring labor render the North American market harder to make headway-in than elsewhere. Executive Kanehana citing obstacles such as complex interpretations of written specifications and a requirement to use U.S. suppliers even if they are not up to par.
- Product Issues once Sold: Washington DC Metro – The train wheels appear to have moved outward from the railcars, causing the cars to come off the tracks. Problems with the wheels were found 52 times since 2017. In 2021, 18 times were found this year. Also, cars removed from service to be inspected (NYC Metro inspections) earlier this year revealed flaws requiring replacement of all wiring in 548 of about 600 new 7000 series cars.
Up till 2013, Kawasaki had 25 years of experience in building product, labor, and suppliers in the US with plants in Yonkers, NY and also Nebraska. In 2021, the company is experiencing similar issues which now may be the final straw in its existence in the US and building railway passenger cars.
The company had established a restructuring plan after sustaining a net loss of $31 million for the six months ending September 2018. I suspect the latest issue in Washington DC will result in Kawasaki closing its US doors.
Each of these issues has resolution if Kawasaki is willing to partner beyond just buying components. Partnering would include being on the manufacturing floor to discover what may be causing the issues with the wheels. Obviously something is not happening according to specifications given to the supplier or is not in the specifications or is not being understood.
I am not used to seeing these types of quality issues with Japanese owned companies.